Taxation of Payments Received From NYCERS

Taxation of Payments

Received from NYCERS

NYCERS





February 2022

GENERAL

NYCERS¡¯ benefit payments (monthly retirement allowances, loans and excess refunds) are subject to Federal taxes, but are exempt from

New York State and local income taxes if your primary residence is within New York State. If you are not a resident of New York State, you

should check with your state tax authority to determine the taxability, if any, of the benefit payments you will be receiving from NYCERS.

PENSIONS

Pension payments received from NYCERS are subject to Federal income taxes, but part of it may be excludable. Contributions may be

tax-free because they were taxed when deducted from your paycheck, so they are not subject to a second taxing. An example could be

voluntary contributions that Tier 1 and Tier 2 members make to enhance their retirement benefit. An example for Tier 3 and Tier 4 members

may be the purchase of previous service paid for by payroll deductions or lump sum (other than by rollover from a qualified Deferred

Compensation Plan). Each year thereafter, NYCERS will send you a 1099R that will include this same information for that specific tax year.

Because the IRS considers your pension payments to be a source of income, you are required to pay Federal taxes. When filing for

retirement you may choose to automatically have these taxes withheld or to make quarterly payments to avoid a penalty at the end of

the year.

Once you are retired, if you choose to change the amount of your withholdings please obtain and submit NYCERS Form #349 (Application

to Change Federal Income Tax Withholding), which is available on our website, in our Customer Service Center or through our Call Center.

LOANS AT RETIREMENT

According to IRS regulations, any loan taken at or near retirement must be treated like a retirement distribution and, therefore, is subject

to Federal taxation. However, the taxable amount may be rolled over to an Individual Retirement Account (IRA) or Employer Plan in order

to temporarily avoid Federal income tax consequences. The taxable distribution is outlined on the Election of Payment Notice sent to you

by NYCERS.

For those who choose not to roll over the taxable amount, NYCERS is required to deduct 20% Federal withholding tax on the taxable

portion before issuing the check. In addition to being taxable at the member¡¯s normal tax rate, if you have not reached the age of 55 and

you choose not to roll over the taxable portion, you will also be subject to an IRS early distribution penalty tax of 10% when you file your

Federal tax return.

Please note that if you have a prior outstanding loan at retirement on a repayment schedule of five years or less, the balance may also

be taxable and eligible for you to roll over on your own. Two to three months after your effective date of retirement, you will receive a

letter from NYCERS advising you of the taxable amount of the prior outstanding loan. This letter will remind you that you may defer your

Federal tax liability by rolling over the taxable amount to an IRA or Employer Plan. You will have until the due date (including extensions)

of your tax return for the year in which you retire to roll over the taxable portion of your prior outstanding loan; otherwise, you will have to

claim it as income on your Federal return.

ROLLOVER

You should retain any records that identify NYCERS as the source of funds that have been rolled over in order to avoid New York State

income tax on future withdrawals. The distribution rules, restrictions, and tax consequences for the institution you choose may differ.

NYCERS is a Qualified Pension Plan under ¡ì401(a) of the Internal Revenue Code.

Taxation of Payments Received from NYCERS #897 - Page 1

340 Jay Street, Bklyn, NY

Mezzanine level

Forms, Brochures,

Fact Sheets at



Upload Documents at



(347) 643-3000

M - F, 8am to 5pm

30-30 47th Avenue, 10th Fl.

Long Island City, NY 11101

Taxation of Payments Received From NYCERS

February 2022

TIER 1 AND TIER 2 EXCESS AT RETIREMENT

This section is only applicable to Tier 1 and Tier 2 members.

Excess refers to contributions and interest credited to your member account after you have met the minimum required years of service for

your plan. Excess begins to accumulate January 1st of the year following the year the minimum required years of service for your retirement

plan has been met. Being able to withdraw your excess does not mean you have met the required amount needed in your account to avoid

a deficit. All excess refund applications must be received by NYCERS before your retirement date in order to be processed. Refunds may

be subject to Federal taxation.

The taxable amount is outlined on the Election of Payment Notice sent to you by NYCERS. You may temporarily avoid the Federal income

tax consequences by rolling over the taxable portion of the excess into an Individual Retirement Account (IRA) or qualified Employer Plan.

If you choose not to roll over the taxable amount, NYCERS is required to deduct 20% Federal withholding tax on the taxable portion before

issuing the check. In addition to being taxable at the member¡¯s normal tax rate, if you have not reached age 55 and you choose not to

roll over the taxable portion, you will also be subject to an IRS early distribution penalty tax of 10% when you file your Federal tax return.

WHEN YOU RECEIVE PAYMENTS FROM NYCERS, REMEMBER:

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NYCERS¡¯ benefit payments are exempt from State and local income taxes if you live in the State of New York

All NYCERS¡¯ benefit payments are subject to Federal taxes

You may temporarily avoid Federal taxes by rolling over the taxable amount to an IRA or Employer Plan

Keep all records that identify NYCERS as the source of funds that have been rolled over

Taxation of Payments Received from NYCERS #897 - Page 2

340 Jay Street, Bklyn, NY

Mezzanine level

Forms, Brochures,

Fact Sheets at



Upload Documents at



(347) 643-3000

M - F, 8am to 5pm

30-30 47th Avenue, 10th Fl.

Long Island City, NY 11101

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